CHRIS MATTHEWS, HOST: Baked Alaska. Is the Sarah Palin nomination turning out to be a brilliant distraction from eight years of Republican failure?

Let’s play HARDBALL.

Good evening. I’m Chris Matthews.

Leading off tonight, the post-convention bounce. It happens after just about every election. Candidates get a big bounce in the polls. And John McCain is certainly enjoying one—after every convention, I should say—right now. But something else usually happens. That bounce disappears after a week or two. We will take a look at the latest polls and at the new NBC News state-by-state map.

With 57 days left, we will look at exactly where the race stands right now. Also, Obama takes on Sarah Palin personally. A new McCain ad repeats the claim that Sarah Palin stopped the so-called bridge to nowhere, the project that has become a symbol of wasteful government spending. Today, Barack Obama hit back, and hit back hard.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: When it came to the

bridge to nowhere, she was for it until everybody started raising a fuss about it, and she started running for governor. And then, suddenly, she was against it.

MATTHEWS: Why does all this talk about the bridge to nowhere matter? Well, we will ask the HARDBALL strategists. It has a lot to do with wasting government money.

Plus, the government takeover of the mortgage giants Fannie Mae and Freddie Mac, who’s to blame, and how do the presidential candidates differ on how to fix this housing crisis?

And the battle over change, that word change. Arguing about experience over change didn’t work for McCain. It didn’t work for Hillary Clinton. Can he, John McCain, really make himself a plausible change candidate after eight years of Republican rule? We will look at that in the “Politics Fix.”

And, in case you missed it, we will show you some of my appearance on “The Tonight Show With Jay Leno,” with a funny look at how you tell the difference between a Republican and a Democrat. And we’re going to argue about that one forever. That’s in the HARDBALL “Sideshow” tonight.

But, first, to the nuts and bolts of this election, the polls and the maps.

Joining right me is NBC News political director Chuck Todd. And also joins us is Stu Rothenberg, who writes “The Rothenberg Political Report.”

And we’re getting feedback. We’re getting echo here.

Let’s go to Chuck Todd.

Chuck, first of all—let’s look to the polls before we go to Chuck.

McCain leads Obama by four points in the latest “USA Today”/Gallup poll. Obama was up four points himself two weeks ago. That’s a big turnaround. The new CNN poll has the race tied. Obama was up one point a week ago. It’s even now. And in the pollster.com national average of all polls, Obama leads McCain by now less than a point.

So, you could say this is basically even, with a slight edge to McCain coming out with that bounce out of Minnesota, the Republican Convention.

Let’s go right now to Chuck Todd and his latest, because Chuck Todd is the best, and Chuck Todd understands what? The Electoral College decides these elections, not the popular vote, as we learned in 2000.

(CROSSTALK)

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR: Well, we do.

And we have a new battleground map and a new tool to mess around with it. So, my—apologize to Mr. Rothenberg, because we have got the better tools to play with here for this.

So, the new NBC battleground map, here’s where it was in August. You see the red vs. blue. And we changed a few things. We moved Missouri to McCain. That’s a Governor Palin reaction, pure and simple. They were there today. She excites evangelicals. That’s a—there’s a strong presence there in Missouri. Plus, she will do well with economic populists, women who are economic populists, but culturally conservative. That is going to help there.

We took Wisconsin and moved it in—back into tossup. This is one state that Obama has not been able to put away in the Midwest. He’s pretty much put away Minnesota, done so with Iowa, but he can’t do it there.

And, then, one state that we finally moved out of the tossup category, one close to your heart, Pennsylvania, we moved that from tossup into—into Obama’s category. Look, there’s not been a poll yet that has shown McCain ahead.

Not only that—there hasn’t been a poll that hasn’t been Obama up by at least five points. This is a case where the pick of Biden probably solidified this state narrowly, too many advantages going the Democrats’ way, and couldn’t get many Republicans to argue against moving—moving Pennsylvania out of there.

So, this brings our total 228, 200, leaves 110 in the battleground here, Chris, and pretty much the battleground being the big four at this point, probably the four closest, Colorado, Ohio, New Hampshire, and Virginia. These are the four that pure tossups. Every other one has a slight lean in one direction or the other. These are the probably the biggest pure four tossups that we have got going.

Look, it’s still a map where he has got the advantage. He’s playing offense. There are more so-called red states at play than blue states.

MATTHEWS: Yes.

TODD: The only blue states that—that McCain is trying to do—put in play really are—are Michigan right here, and now Wisconsin. He’s given up really on Minnesota. They won’t claim that they have. Pennsylvania is looking tougher and tougher. They’re still going to compete there. And—really and New Hampshire, that’s the only other one.

Other than that, he’s not really going after Oregon. He’s not going after Washington. We have heard some chatter about it, but it’s—these are states that are, you know, not there. But, look, the Republicans are the ones that have won the last two cycles, so of course they are going to be more on defense.

MATTHEWS: What do you think about that map, as he’s updated it, Stu Rothenberg? Do you think that’s right? Do you think Missouri is even? Do you think Pennsylvania now is leaning toward the Democrats to Barack Obama? Do you believe that Wisconsin is a tossup now? Do you buy this latest adjustments in the map we have got here?

STUART ROTHENBERG, EDITOR AND PUBLISHER, “THE ROTHENBERG POLITICAL

REPORT”: Well, Chris, I think you can argue one way or the other on a number of these states.

Generally, Chuck has not moved the purest of tossups. I’m not sure whether the Republicans really have a good chance to—to win Wisconsin. I—I never thought that Pennsylvania was a pure tossup. And I always thought Missouri was tilting slightly Republican. But you can make a case for all of them.

But I think Chuck is absolutely right. There are a half-dozen states that are really pure tossups that are probably going to decide the next president.

And I’m looking at this. People are watching right now and they’re saying, are you talking about what would happen if we had the election tomorrow morning?

TODD: Yes.

MATTHEWS: OK.

(LAUGHTER)

MATTHEWS: So, in other words, we’re talking about the election if it were held tomorrow morning, knowing we have got four big debates, including three presidential debates coming up. We have events that can occur, like wars...

(CROSSTALK)

TODD: Right.

MATTHEWS: ... all kinds of things that can happen. So, this is not a projection.

TODD: We can move it right here right now. We can move. New Mexico would be an Obama if it were today. Wisconsin, we would move that to Obama. Michigan, we would move that to Obama.

For McCain, we would move Florida in his direction here. We would put that red. We would put Nevada red. And then that would leave us four states left. That would put us 260-232. And that would leave us simply with these four here that I don’t think to this day there are as many polls that show McCain up in Colorado as they show up Obama, ditto in Ohio, ditto in Virginia, ditto in New Hampshire.

MATTHEWS: OK. So, there’s four states you think—if you project forward, push, as you have hit, push the leaners...

TODD: If you made me do this today.

MATTHEWS: ... push the leaners to one side or the other, make them commit, you end up with what states are the four that will remain unable to be picked at any point in here?

TODD: Colorado, Ohio, Virginia, New Hampshire. That would be my four. Stu might have a different formula.

MATTHEWS: Stu, do you buy Virginia is that hard to pick, is that even?

ROTHENBERG: I think Chuck has it absolutely right.

I think, right now, those are the four tossup states that are most likely. You tell me where those go and I will tell you who’s the next president.

MATTHEWS: That is fascinating. Virginia, Ohio, Colorado, and New Hampshire are the toughest to call at this point.

ROTHENBERG: Yes.

MATTHEWS: Given their history, though, Virginia is a Republican state historically. New Hampshire is a split. Colorado is Republican. Ohio has been Republican. Three out of those four basically have gone Republican in the last couple of days over the years, right, Stu? Don’t they usually end up there?

ROTHENBERG: Yes, that’s right. Yes. So, if you look at the Bush states 2000 and 2004, those three states that you have mentioned, those are part of the Republican coalition.

But Obama’s running very well in them. And that’s why the math kind of favors him very narrowly. If he can pick off one or two of those states, he is going to be the next president. The Republicans have to run the table, really.

I don’t think she’s running as a traditional V.P., which is no big deal. She’s running as kind of like the other partner, somewhere between a V.P. and a first lady maybe. She’s coming—first of all, I say that because she’s the first woman candidate, obviously. The gender difference is pronounced here.

She stands up on that stage with John McCain as true partners, almost like they’re going to rule the country together, they’re going to be mavericks together.

There’s something that’s very personal about that, rather than political. I would argue they have changed the topic, Stu, from what you want, what you don’t want in the current reality in this country, the bad economy, the wars, et cetera, to the who question. Who do you want in the White House? And Sarah Palin is their candidate to be in there, rather than either Joe Biden or Michelle Obama, that it’s a personal thing now.

ROTHENBERG: Yes, I think there is a lot to that, Chris.

You know, Rick Davis took some criticism when he said this election isn’t about issues. But he’s probably right. For swing voters, it’s about personality and leadership and style and change. And she just brings the wow factor.

MATTHEWS: Yes.

But, also, Chuck—and this is tricky business—she’s rural. She’s white. She’s from out in the country. She’s very conservative on rural issues. She’s nowhere near an ethnic from a big city.

TODD: Right.

MATTHEWS: She’s about as far from urban as possible.

Meanwhile, Barack and Michelle Obama are from the South Side of Chicago. They’re urban. They’re ethnic. They’re African-American. They’re community organizers.

And, by the way, there’s a phrase I wonder about, community organizers. Do Republicans think, Stu, when they say that, we’re supposed to think Al Sharpton? What do they—why would they use that to toy with this week? Rudy Giuliani got the biggest giggle out of that. And, then, of course, Sarah—Sarah Palin did.

Up next: Obama takes on Sarah Palin on Alaska’s bridge to nowhere. This is a phrase we used to hear, bridge to nowhere. This is the bridge that cost, like, $300 million, and, apparently, it didn’t serve more than a couple hundred people, and, apparently, was a boondoggle, and recognized as such by all parties.

But, in the beginning, apparently, it was championed by Sarah Palin.

You’re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Coming up: Is the key to the McCain win in November in the hands of Sarah Palin?

When HARDBALL returns.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL.

Well, the McCain campaign has a new ad out that touts Sarah Palin’s opposition to that costly bridge to nowhere up in Alaska that cost about $300 million and served about 300 people.

And, today, Obama went after Palin for actually changing her position on that project.

For more on that, let’s bring in the strategists, former McCain spokesman Todd Harris—he’s right in front of me here—and Democratic strategist Steve McMahon.

Happy guys. It’s nice to have happy guys.

(CROSSTALK)

STEVE MCMAHON, DEMOCRATIC STRATEGIST: ... very happy.

MATTHEWS: Let’s take a look at this interesting thing. Let’s take a look at the latest advertisement. There’s going to be three items I am going to show you right now. The first is the ad that basically denies that Sarah Palin ever backed this boondoggle of a bridge to nowhere, this wasteful government spending up there in the beginning, never, ever backed it.

And then you have got Barack coming up, and he’s going to say in his attack that she backed it in the beginning, and, when the heat was on, she changed her mind. And then we have evidence that she did initially back it generally in the beginning.

Let’s take a look at all three items, first, the ad from McCain denying that she’s guilty of backing this boondoggle.

(BEGIN VIDEO CLIP, MCCAIN CAMPAIGN AD)

NARRATOR: The original mavericks. He fights pork barrel spending. She stopped the bridge to nowhere. He took on the drug industry. She took on big oil. He battled Republicans and reformed Washington. She battled Republicans and reformed Alaska.

MATTHEWS: Well, I thought that was going to be an ad saying that she supported—or opposed the bridge to nowhere. It didn’t.

But here’s what Obama said today about Governor Palin’s position on the bridge to nowhere.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: When it came to the

bridge to nowhere, she was for it until everybody started raising a fuss about it. And she started running for governor, and, then, suddenly, she was against it. Do you remember that, for it, before you were against it?

OBAMA: You can’t just reinvent yourself. The American people aren’t stupid.

(END VIDEO CLIP)

MATTHEWS: Well, I just missed that point. Apparently, in that first ad, McCain/Palin, she clearly was identified as the person fighting the bridge to nowhere. Then, of course, you have got Barack Obama in his speech right there saying she supported it initially.

So, let’s find out the truth.

The fact is, while running for governor in September of 2006, candidate Palin told the Ketchikan—the Ketchikan Chamber of Commerce that she supported the bridge. She said—quote—”The money that’s been appropriated for the project, it should remain available for a link”—that’s the bridge—”an access process, as we continue to evaluate the scope and just how best to just get this done. This link”—again, the bridge—”is a commitment to help Ketchikan expand its access, to help this community prosper. I think we’re going to make a good team as we progress that bridge project.”

Well, this is odd English, “progress that bridge project.”

She clearly supported it as a local issue as she campaigned locally, right? Do we agree?

TODD HARRIS, REPUBLICAN STRATEGIST: Well, she supported the idea of some kind of link.

HARRIS: If you ask Ted Stevens and Don Young what they think of Sarah Palin, they will not have kind words to say, because, as they were sending pork to Alaska, she was fighting it.

(CROSSTALK)

MATTHEWS: On the particular point, did she support the bridge in the beginning?

HARRIS: She supported some kind of link, but not a $400 million...

(CROSSTALK)

MATTHEWS: OK. Why is this an important debate? Because the people out there—I’m trying to keep track. I have sort of sworn to myself over the weekend that I’m going to try to keep this campaign focused on real issues that really matter, like how are we going to compete in the world economically?

We have got a 6.1 percent unemployment rate. It’s spiking. It’s going to higher—probably be higher next month. We owe $10 trillion, the federal government now. It only owed about $4 trillion when the Bush administration came in—all kinds of economic challenges out there, including energy, transportation, infrastructure.

Is this what we’re debating, who backed what boondoggle? How does it get to the big question of who should rule the country the next eight years?

MCMAHON: Well, because the big question is character, authenticity, and truthfulness, and how you behave.

And it seems that Sarah Palin, notwithstanding that she says she’s change and she’s been different, behaves just like every other politician. She was for the bridge, whether it was a skinny bridge or a fat bridge.

MATTHEWS: So, she’s a porker? She’s a pork barreler?

MCMAHON: She’s a porker, just like everybody else. And she’s not just a porker.

Did I just call Sarah Palin a porker?

(LAUGHTER)

MATTHEWS: No, and we don’t mean that. I know what you mean. She’s a pork barreler.

MCMAHON: She’s not just a pork barreler, but she is also somebody who

you know, who is not apparently shy about getting involved in a personal family matter, and using her office...

MATTHEWS: Are we going after that stray dog, that she supposedly got some brother-in-law—tried to get her brother-in-law from the state troopers?

(CROSSTALK)

MCMAHON: Here’s the question. Here’s the question.

We just had an administration that didn’t tell the American public the truth and that many people believe abused power. And the question is, do you want an administration that isn’t going to tell the truth and that perhaps was abusing power? That’s a very legitimate question and...

MATTHEWS: Why are we arguing about a vice presidential nominee who was obviously put on the ticket for cultural conservative reasons, to nail down the cultural right, who probably will not govern? Don’t you think that John McCain’s going to govern this country?

HARRIS: Look, the president is always in charge. But I’ll tell you why we’re talking about this bridge. I’ll tell you why Steve...

MATTHEWS: All right.

HARRIS: ... is bringing up this whole family issue. It’s because McCain got a big bump out of his convention. Republicans are enthusiastic about the Palin choice.

MATTHEWS: Yes.

HARRIS: All of the polls, he’s either overtaken Obama or they’re at dead heat and the Obama campaign is panicking. And so now they’re starting all these grenades that they’re just throwing...

(CROSSTALK)

MATTHEWS: Is that true?

MCMAHON: Everything but the panic. I mean, the McCain campaign did get a big bounce. The conservatives are united. There’s an enthusiasm gap that’s been bridged. But it’s based—the question is whether or not it’s based on information that’s true and factual and accurate. And that’s why people are so concerned about whether or not she was for the “bridge to nowhere” before she was against it, whether or not she abused power as governor. Maybe she didn’t...

MATTHEWS: You think it’s a legitimate question to ask whether she really backed this pork barrel back in the old (ph) days (INAUDIBLE) $300 billion—million bridge that wasn’t really useful except for getting some money spent in the district?

HARRIS: It was $400 million, and she never backed the $400 million bridge. It is appropriate to say, Is she a maverick? And look...

MATTHEWS: Let me ask you...

(CROSSTALK)

HARRIS: ... $200 million in cuts from the Alaska state budget in pork when she became governor, slashed $200 million...

MATTHEWS: Well, then let’s talk about her views. She wants to outlaw abortion for everything, including rape and incest. Do you want that to be that the law of the land?

HARRIS: I don’t think the American people...

MATTHEWS: Do you want that to be the law of the land?

HARRIS: I don’t think the American people...

MATTHEWS: You.

HARRIS: ... want that.

MATTHEWS: Do you want it?

HARRIS: My opinions don’t matter.

(CROSSTALK)

MATTHEWS: Do you believe that—do you believe in creationism or evolution? She believes in evolution, not in creation—she believes in creationism, not evolution. Do you believe that? Do you think what you were taught...

MATTHEWS: ... what you were taught in science in school in biology and chemistry all was true or false?

HARRIS: Look...

MATTHEWS: No, I’m just asking you. Do you think it was all false?

HARRIS: My opinion doesn’t matter about any of this.

MATTHEWS: OK. She doesn’t believe in climate change—not man’s role in creating climate change. She doesn’t believe in evolution. She doesn’t believe in legal abortion anywhere. I’m just trying to find out where she coincides with the Hillary voter who is legitimately concerned that Hillary didn’t get the shot that they feel she deserved. And yet you guys are pitching her as a fill-in for Hillary.

HARRIS: Well...

MATTHEWS: I’m just asking, in what way is she a fill-in, except, obviously, gender?

HARRIS: She—voters in—whether it’s Pennsylvania, Ohio, all these places where Hillary did well, they didn’t vote for her because she was a woman. They voted for her because she’s more culturally conservative than Barack Obama is. And...

MCMAHON: It’s cynical. It’s cynical. And you got to it a little bit in the last segment. The McCain campaign wants to make the case that Senator Obama is both urban and urbane. And urban and urbane is not consistent with small-town values in Pennsylvania, in Ohio, in Michigan, in places where they want to try to turn this thing. It’s part cultural, but it’s also part racial. They would never admit that, but it’s a fact.

MATTHEWS: So she’s an alternative to the Obama family. They’re from Chicago. They’re black. And she’s from Alaska and rides a snowmobile.

(CROSSTALK)

MATTHEWS: I mean, is that what it’s about? And I think it is a cultural...

(CROSSTALK)

MATTHEWS: I think it’s a who rather than what campaign. And the Republicans have brilliantly changed the topic from what’s gone wrong the last eight years and whose fault is it to who do you want living in the White House personally.

MCMAHON: Here’s what Republicans do. They basically want to frame the issue around this; Who’s more like you? And it doesn’t matter that Senator Obama is black, really, because they did the same thing to John Kerry, the exact same thing.

MATTHEWS: Oh, he’s a community organizer. I get the—I get the message.

Thank you, Todd Harris. Al Sharpton—I get the message. Get it.

Just give me the organizer.

HARRIS: That’s what he calls himself!

(CROSSTALK)

MATTHEWS: I know. Todd Harris, Steve McMahon. You know what—hey, you giggle at this stuff. You froth at this, how clever this is.

Up next: Just in case you missed it Friday, there was a special guest

well, let’s talk about the “Tonight” show. I had some fun on that show the other night. I love Jay Leno.

“Sideshow.” Well, after the Republican convention was over last week, I headed to LA to do “The Tonight Show With Jay Leno.” And after spending two weeks with the two different political parties—and they are different—I tried describing—I tried describing what makes Republicans different from Democrats. Here it goes.

(BEGIN VIDEO CLIP)

JAY LENO, HOST: You were at both conventions. Compare both conventions.

MATTHEWS: Well, they’re different, these political parties. I mean -

I mean, you go to the movies—just give you an example because everybody goes. Imagine you go to the movies, and some people get to the movies early and they’re sitting there all organized. They got their ticket in their hand. Everything’s organized. And then the movie starts. And then some other loud people come in real late, and they’ve got a big box of popcorn and a trash can of Coke. Those are Democrats.

(LAUGHTER)

MATTHEWS: The Democrats are coming, and they’re late. They don’t know what time the movie starts. They’re having more fun. They think it’s fun to go to the movies. The republicans are serious, you know, Going to see a film here, you know?

(LAUGHTER)

MATTHEWS: So I mean, the conventions are like that. The Republicans are buttoned-down. They’re business people. Imagine, they showed a video the other night about Cindy McCain’s father, this heroic story about how the man started a Budweiser distributorship. You wouldn’t get that at a Democratic convention. What’s this tired stuff about? You know, this guy’s a boring business guy. Republicans—I love this guy! He’s my hero! A Budweiser distributorship, that’s what built America, you know?

MATTHEWS: You know, at the Republican convention, when they say, Please clear the aisles, they clear the aisles. That’s the difference, too.

Well, political strategists and fundraisers can feel like they’re always the bridesmaid, never the bride. Well, it looks like Terry McAuliffe is stepping up to that altar. When reporters at the Democratic convention asked the former DNC chair and key Clinton friend about reports that he’s going to run for governor of Virginia next year, the fund-raising was coy saying, “I never rule out anything. Every day is a new opportunity. I’d like to be pope, if I could.”

Well, the fact is, after all that coyness, Terry is running for governor of Virginia next year. He’s running hard, he’s running early, and he’s running with a huge war chest. He has years (ph) of friends. He’s helped get people elected. They’re paying him back now. They’re going to be helping him. Watch this race in 2009, Terry McAuliffe for governor of Virginia.

Next: There was another ‘08 dance-off on “Ellen” the other day. We all remember Barack Obama showing off his dance moves on “The Ellen Degeneres Show”—pretty cool. That was late last year. Well, this morning, his wife, Michelle, tried to show him up on that daytime show’s season opener.

(BEGIN VIDEO CLIP)

ELLEN DEGENERES, HOST: Now, you know, I got to say, and your husband’s a good dancer, but you’re a better dancer than him.

Now for tonight’s “Big Number,” and it’s a good one tonight. In the months since the primaries ended, we’ve watched and waited to see if the two titans in the Democratic Party, Bill Clinton and Barack Obama, would bury the hatchet and meet one on one. Well, it looks like the long wait is over. The Obama campaign has announced today that the two great leaders will plan to lunch this Thursday up in Harlem—that’s this Thursday up in Harlem. Watch for that picture—well, we don’t have evening papers anymore. Watch for the paper (SIC) on the nightly news with Bill hosting that lunch.

So just how long after the primaries ended did it take for Bill and Barack to get together for an extensive face-to-face meeting? One hundred days. That’s how long it took for the past and present leaders of the Democratic Party to meet up and try to figure out how to win this election, 100 days. That’s our number tonight of waiting for the Barack and Bill two-shot, the big photo op. That’s coming to Harlem on Thursday. That’s tonight’s “Big Number.”

Coming up: With eight weeks until election day, both campaigns are full speed ahead. We’re going to catch up with some surrogates from both sides. Those are the guys who fight for both sides. We’ve got a big one, too, the current governor of Virginia.

You’re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

(MARKET WRAP)

MATTHEWS: Welcome back to HARDBALL. Let’s turn now to the surrogates. In a moment, U.S. Congresswoman Heather Wilson of New Mexico. She’s been on many times before. She supports, of course, John McCain for president. But up first, a major new governor, Tim Kaine of Virginia. He’s an early Obama supporter who was on the short list for VP, we’re told.

Governor Kaine, tough question. I want to talk about Freddie Mac and Fannie Mae in a minute. We’ve got 6.1 percent unemployment right now. We have the federal government owing almost $10 trillion under this administration. The dollar is—well, people come to America on shopping sprees, the dollar’s worth so little. What’s Barack Obama going to do, if he gets into office on January 20, to solve our economic downturn?

GOV. TIM KAINE (D), VIRGINIA: Well, he’s going to try to juice the economy, Chris, by focusing upon the backbone of the American economy, which is helping middle class Americans deal with fiscal stress and helping small businesses be successful.

I think the fundamental different between Barack Obama and John McCain is the way they describe what success looks like. For John McCain, success is cutting taxes on the largest businesses and the wealthiest individuals. For Barack Obama, success is how’s the middle class doing, with middle class tax cuts, and how we can help small businesses be more successful by eliminating capital gains on small businesses and giving them tax credits if they buy health care for their employees. That is the fundamental difference between...

MATTHEWS: So lower taxes for people in the middle.

KAINE: ... the two candidates.

MATTHEWS: OK. Got you. Now, let me ask about war and peace...

(CROSSTALK)

KAINE: ... for folks in the middle and small—and small businesses. That’s really important. My dad ran a five-man iron-working and welding shop. Small businesses are the backbone of the economy, and Barack targets his tax relief toward them, not to the businesses that are the ones that are the well-off at the top and who don’t need help.

MATTHEWS: Let me ask you about the other issue. I know—I think you opposed the war...

KAINE: Yes.

MATTHEWS: ... in Iraq. I certainly have questioned it on this program. I think that most Americans think it was a mistake to place the entire American Army, basically, in Iraq in a pinned-down position where the president said today we can’t spare one soldier. It’s that significant. How would Barack avoid having gotten us into a situation like this? How will he avoid future situations like this? How’s his mindset different than Bush’s or McCain’s?

KAINE: Well, let me just start, Chris—I’m going to correct you at the start. I thought there was a rationale at the beginning of the war for America to take part in multi-lateral action with other nations to remove Saddam Hussein from power. Now, the fact is, we just blew by the whole issue of getting other nations involved and went at it essentially on our own. And that’s part of the problem and that’s what Barack said was such a mistake.

How’s he going to avoid these problems? He’s going to have good people around him and listen to them and exercise good judgment. If President Bush had listened to the people around him who really understood the military situation at the start, instead of going with some of the neocons who really didn’t have much background in this area, he never would have engaged in this essentially unilateral war against Iraq.

MATTHEWS: Do you think he might bring in General Powell? Do you think he might bring in some of the name brands we know about? Will he keep Gates? Will he bring in the heavyweight, some Republicans, as well?

KAINE: I don’t—yes, I’m not privy to that, but I know this. I have been on board with the Obama campaign as a national co-chair since February ‘07. He prides himself and he’s very good at bringing the best people around him because a president doesn’t know everything about everything. You’ve got to have good people around you and you’ve got to listen.

And from the very beginning, Barack has said—and I know you realize this—if we go into Iraq, we’re going to take our eye off the ball in terms of finishing what we need to do in Afghanistan, which he supported. Do you know the war in Afghanistan—it was like the lost war during the Republican convention, very little mention about Afghanistan, about how tenuous things are there.

We need to pull out of Iraq and redeploy more assets to Afghanistan so we can finish the job and the fight against terrorism that is the fight that we should have been weighing (SIC) from the very days after 9/11.

MATTHEWS: Well, John McCain, in giving I thought a rather good acceptance speech, never mentioned the name President Bush, which I thought was interesting, nor, I think, did he mention the word Republican much at all.

KAINE: Well, I tell you—the acceptance speech of John McCain was probably my favorite moment of both conventions because he said, I’m now—after all of this time, I’m now going to be the change candidate. So, on the one hand, with Barack Obama, Chris, we’ve got the change you can believe in. He’s been talking about change since before his Senate race in 2004, the need to have better management of the economy and better national security.

John McCain’s late-breaking conversion to change is, like, America, just give me one more chance and I’ll promise this time I’ll change. I really mean it. That’s not going to work with Americans, who have seen him again and again support President Bush down the line. I can’t find one instance even today where he has proposed a policy that is at odds with what President Bush has been doing for the last two terms.

MATTHEWS: Have you encouraged Terry McAuliffe, the former chair of the DNC, to run for governor of Virginia to succeed you? Have you encouraged him to do so?

Terry was interested until I heard him speak out in Denver. He indicated

he was. We’ve got two legislators in Virginia who have lined up to

potentially run, and Terry now is coming in and saying he’s thinking about

it. They’re all great. You know, it used to be, Chris—you know this,

in Virginia, to get somebody to run state-wide as a Democrat it was like

trying to—let’s let Mike eat the cereal. Nobody wanted to do it,

because it was so hard. The fact that we now have such a competitive state

--

MATTHEWS: I guess you’ve encouraged Terry to run. Anyway, thank you, Governor Kaine. It’s great to have you on the show at any time.

KAINE: Good to be back with you.

MATTHEWS: Now joining us, Republican U.S. Congresswoman Heather Wilson of New Mexico. Thank you, Congresswoman, for joining us. I have to ask you a couple of questions, very similar, just to keep it even Steven. The unemployment rate is up to 6.1 percent. Knowing the pattern, it will probably go up again. We’re at that point in the cycle. What would President McCain do, day one, to turn around the economy, bring it up again?

and Governor Kaine talked about this, but it has to do with taxes and keeping taxes low, both on American—individuals but also on small businesses. The thing that he got wrong was that Senator Obama voted in favor of raising taxes on people making 42,000 dollars a year or more. And that’s a big difference.

MATTHEWS: Again, what would John McCain do positively to get us out of this economic dump right now, this downturn? What would he do positively that hasn’t been done before?

WILSON: Number one is keep taxes low.

MATTHEWS: They’re already low. Unemployment is rising under the current—no, I’m asking a question you’re not answering. What is he going to do?

WILSON: You’re not letting me answer.

MATTHEWS: I’m asking you again. Third time, what’s he going to do?

WILSON: The second thing he’s going to do, in addition to keeping taxes low on small business, is to make America less dependent on foreign sources of oil. We’ve given 700 billion dollars abroad to buy oil from people who don’t like us very much. We need to be more energy independent. That will help.

MATTHEWS: How does drilling off-shore give us a separate supply of oil from the world’s supply of oil? How do we keep that from going on the world market, which drilled off-shore?

WILSON: It’s a commodity. There is a world market. But if we have to—if we can buy oil, not only oil, but natural gas, solar, nuclear, so that there is more American-made energy, we become less dependent on sources of supply that are unreliable overseas.

MATTHEWS: But why would we get that oil? Wouldn’t it be on the world market? Wouldn’t we have to bid for that oil? These are multi-nationals who do the drilling. Why would we get the oil? The Chinese could outbid us per barrel and buy it rather than we getting it. Why do you assume we would get it.

WILSON: There are three parts to the strategy. One is to increase the supply of American-made energy. The other is to reduce demand through conservation and new technology. And the third is to invest in game-changing technologies that get us beyond the gasoline engine. In the short term, we need to increase supply. We have a supply problem, and that is a critical part of the answer.

MATTHEWS: I was trying to get at the first question. I’m sorry to be pushy. I apologize. Is John McCain committed to lowering taxes below the tax cuts of the Bush administration? In other words, will he do something further to stimulate the economy? Obviously, the current tax cuts can’t work right now. We’re at the bottom of a cycle right now. How do we get to move up in January, so the unemployment rate doesn’t continue to spike? That’s what I’m asking. Does he do something further, in terms of tax cuts?

WILSON: What he said last week was we need to make the tax relief we have permanent. If you remember, they’re all temporary and they’re all going to go up automatically unless Congress acts. The other thing he has said is to cut taxes further where he can. Now, he wasn’t specific about that last week, but we want to keep taxes low, particularly on small business, which is the engine of economic growth in America.

MATTHEWS: Well, maybe you can call him up and tell him we need more tax relief, because what we have now isn’t exactly enough, because this cycle is going down. I’m looking at 6.1. It’s the highest it’s been in five years, Congresswoman. Aren’t you concerned it’s going to get deeper tan that, the way it’s going?

WILSON: We’re all concerned about the economy. We’re all concerned about housing as well. And we’ve got to do things that are the right answer, and big government and higher taxes takes us exactly in the wronging direction. That’s where Senator Obama would want to go. I’m a big believer in private enterprise and in small business, which is where seven out of ten new jobs come from.

MATTHEWS: Thanks very much. U.S. Congresswoman Heather Wilson of New

Mexico, who is backing John McCain for president.

Up next, the conventions are over, the vice presidents nominated. What’s next? Well, the debates are coming, and they’re going to be the biggest show in the history of American politics in terms of numbers. Maybe 100 million people are going to watch that first debate in Ole Miss at the end of this month. Let’s talk about that and other things, where this campaign is going right now with the politics fix. HARDBALL, coming back.

(COMMERCIAL BREAK)

MATTHEWS: We’re back. It’s time now for the politics fix. Joining me is Chrystia Freeland of the “Financial Times,” and Michelle Bernard, who I spent most of two weeks with in various capitals. Chrystia Freeland as well. You know, let’s take a look at all of this together, what happened today. Let’s just take a look at the campaign trail today. First of all, Governor Palin, then Senator McCain, then Senator Obama. Let’s look at all what they’re pushing. You’ll notice, there’s a common thread here.

PALIN: Our opponent, he still can’t acknowledge the coming victory in Iraq, and he couldn’t just yesterday, even in an interview, he said he’s for change, but in Iraq change happened and that’s a great thing for America, senator. So here is how I look at the choice that we face in this election. In politics, there are some candidates who use change to promote their careers and then there are those, like John McCain, who use their careers to promote change.

MCCAIN: We’re going to win this election. And let me offer an advance warning to the old big standing, do nothing, me first country second, Washington crowd: change is coming. Change is coming. Change is coming.

OBAMA: When it came to the Bridge to Nowhere, she was for it until everybody started raising a fuss about it and she started running for governor. And then suddenly she was against it. Do you remember that for it before you were against it? I mean, you can’t just make stuff up. You can’t just recreate yourself. You can’t just reinvent yourself.

The American people aren’t stupid. What they’re looking for—what they’re looking for is somebody who has been consistently calling for change.

(END VIDEO CLIP)

MATTHEWS: Well, of course, Michelle, he acts like—Senator Obama that we’re not stupid. We’re not going to fall for this. But what I see happening in this campaign is a brilliant switcheroo from the question is it time for change, a new administration to come in after eight years of Republican rule, to who do you like? Do you like Michelle and Barack Obama or do you like this new pair here? They’re almost running as a pair. Not a marital pair, but a pair. She’s offering herself up as not quite first lady, but something like that. She’s going to be in the White House. It is a very interesting thing they’re doing. Do you like this woman from Alaska? Do you like this guy from the south side of Chicago? To me, it is a who, not a what question. I think it is smart, but I’m not sure I like it.

MICHELLE BERNARD, MSNBC POLITICAL ANALYST: It is smart. Barack Obama

coined the phrase, change, but we heard it from Governor Palin last week. We’ve heard it from John McCain over and over and over again. What we do realize coming from with this election, no matter who is elected, change is coming. McCain is right when he says that. It is a matter of who do you want? He and Sarah Palin are billed as the mavericks and Barack Obama and his wife are billed as something completely different. I don’t know what terminology to use for how the—

MATTHEWS: Cosmopolitan. Chrystia, it seems to me that the use of the word community organizers as almost like a bull whip. Rudy Giuliani used it. He is not exactly light-handed when it comes to this. He can be heavy-handed. He giggled about the phrase community organizer. Are they saying that Barack Obama is Al Sharpton? Is that what they’re saying? Is that what the real brand they’re trying to put in?

FREELAND: I think definitely, especially with that community organizer line, there is a certain dog whistle politics element to. It’s a little bit of a way of saying, wink, wink. Remember, he is actually African-American. It’s a way of suggesting a strongly leftist agenda. You know, which community are you organizing? What are you organizing that community to do?

I think you’re absolutely right. I think, you know, the change message that we heard from Sarah Palin and John McCain is only step one for them. Step two for them is to say, OK, we’re going to change things too. We’re the outsiders, not the insiders. But what they’re also saying is, aren’t we a little more like you than these Democrats? Wouldn’t you rather hang out with us?

MATTHEWS: I look at them. I look at John McCain, a little older than me. I look at Governor Palin, much younger. I look at one of those 5:00 anchor team, 4:00 anchor teams. The older guy has been at the station for 30 years and the new person, who is a woman, and they team them up that way. I think there is a lot of stuff going on here. It’s more than just who is my vice president. The vice presidents won’t do much unless they have to take over. They don’t want to talk about that possibility.

What do you make of this? This Who factor. Do you want this couple or do you want Barack and Michelle in there? We got to come back. I want you to think about that. I’m sorry, I’ve just been told we have a break. This is to me the cleverest move they’ve ever pulled, which is to switch them from what do you want to who do you want? Maybe it is fair if all is fair. We’ll be back with the round table. You’re watching HARDBALL, on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: We’re back with the round table for more of the politics fix. Chrystia Freeland, I want to you respond first to this new ABC/”Washington Post” poll just out tonight. Compared to two weeks ago, look at this—two weeks ago, Barack Obama was up by six. Now he is only up by one. What do you make of it?

FREELAND: I think it is really bad news for the Democrats. I think that the Republican convention did much better for the Republicans than a lot of the Democrats would have believed. I do think we have to put a lot of this down to the Sarah Palin effect. Both in the impact she individually is having, and what it has allowed McCain and the Republicans to say about themselves, that they’re mavericks, that they’re outsiders, and shifting the debate back to the culture wars, which is an arena in which historically Republicans have won.

MATTHEWS: I referred to it as baked Alaska when we started, because it’s kind of a confection. It’s a brilliant way to shift the attention—most voters vote the ins out and the outs in after eight years. Change that to who do you like. Who do you feel comfortable with? Well, I feel more comfortable with that woman from Alaska than I do from this Democrat crowd.

BERNARD: They might feel more comfortable with that woman from Alaska than with Senator McCain. This definitely the Palin affect. Her speech last week was absolutely brilliant. She did a great job. She energized the Republican base. John McCain could not have gone into the month of November without having the Republican base unified. They’re unified. They’re energized. They’re excited.

I would have expected this kind of a bump coming out of the Republican convention. The question will be how long can they sustain it and what is going to happen over the next few weeks? Every poll is just a snap shot in time.

MATTHEWS: Chrystia, do you think it is a trend or a bump? I think it might be a trend. I think they might be on to something. What do you think, quickly? Trend or bump?

FREELAND: I think it could be a trend and what the Democrats have to do is make this an economy stupid election.

MATTHEWS: They have to get back to objective facts. Personalities could lose it for them. Chrystia Freeland, thank you. Michelle Bernard—

Join us again tomorrow night at 5:00 and 7:00 for more HARDBALL. Tonight at 8:00 p.m., Barack Obama will be with Keith Olbermann on “COUNTDOWN.” Right now, it’s time for “RACE FOR THE WHITE HOUSE” with David Gregory.

Content and programming copyright 2008 MSNBC. ALL RIGHTS RESERVED. Transcription Copyright 2008 ASC LLC (www.ascllc.net) ALL RIGHTS RESERVED. No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user’s personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon MSNBC and ASC LLC’s copyright or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.